This could strongly impact regional financial markets and mirrors a global trend of monetary tightening by Central Banks.

The Central Bank of West African States (BCEAO) might increase its key interest rates at the upcoming monetary policy meeting, scheduled for June 2023, according to information from Agence Ecofin. This would be the fifth consecutive time within a year that the Bank will raise its rates, mirroring a global trend of monetary tightening among major central banks such as the European Central Bank (ECB) and the US Federal Reserve (Fed).

Between June 2022 and now, the BCEAO has raised its key interest rates four times. Through this, the apex lender aimed to control inflation, safeguard foreign exchange reserves and stabilize economic growth. The latest hike was in March when the Bank increased its refinancing rate to 3%.

Despite inflation decreasing for four consecutive months, it steadied in March 2023 reaching 5.7%, far above the BCEAO's target of 3%. Analysts believe raising the key interest rates more would send a strong signal to the market, indicating the Central Bank's commitment to controlling inflation and maintaining financial stability. This could bolster investor confidence in the regional economy and potentially impact the equity market, favoring bond investments and other less risky financial assets.

However, this monetary adjustment also suggests the BCEAO is not convinced that the recent downward inflation trend will continue, and it fears a long-term increase. More tightening could be seen as "overconfidence" in the WAEMU’s economy. According to the IMF, the latter is expected to grow at 6% this year compared to 5.5% in 2022. Last February, the BCEAO predicted that the WAEMU’s real GDP would stand at 5.1% and 5.3%, in Q1 and Q2 2023, respectively. In Q4 2022, the figure stood at 5.4%.

It's worth noting that previous increments in key interest rates led to higher bond yields and a liquidity crisis in the sovereign bond market. However, the situation stabilized in April, thanks to a measure allowing banks to buy their sovereign shareholders' securities in large quantities. The average coverage level for issues rose to 157.10% last week (first week of May) from less than 100% throughout March. It was already at 132% in the last week of April, reflecting a growing appetite among investors for public securities.

A new increase in key interest rates might be welcomed by investors looking for attractive returns in the bond market. But for the region's States, already cut off from international financial markets, the challenges posed by a rise in the cost of regional financing would only grow. This could impact the financing of budget deficits. The net financing needs of governments are estimated at over 4,300 billion FCFA (about $7.2 billion) this year.

On the other hand, states like Benin, which have managed to keep inflation within the BCEAO's target range, find themselves bearing the brunt of the increased key interest rates and the resultant rise in the costs of regional financing.

Fiacre E. Kakpo

In Togo, the Autonomous Road Maintenance Financing Company (SAFER) raised CFA30.46 billion for the 2022 fiscal year from its maintenance activities. This is about 2 billion less than its target for the period–CFA32.84 billion.

The government disclosed the figure on May 8, 2023, during its latest council of ministers. The Minister of Public Works, Zourehatou Kassah-Traoré, on the occasion, stressed the importance of modernizing the country's road transport infrastructure.

Many of the social measures that the government introduced to reduce the cost of living had an impact on the SAFER’s efforts to raise funds. Among these measures was the suspension of the Motor Vehicle Tax (TVM) which caused SAFER to lose nearly CFA2 billion. However, when the tax was reinstated in 2019, the Company was able to raise CFA1.32 billion the next year.

Ayi Renaud Dossavi

Nearly one million Togolese citizens live outside their home country. The figure was disclosed by Robert Dussey, the Minister of Foreign Affairs, on May 8, during a Council of Ministers.

The diaspora counts exactly 950,436 people, according to a censure carried out in 2022. Among them are 52.82% men and 44.18% women.

Leveraging the data, the government will better guide its policies and decisions to make the diaspora a key contributor to Togo’s development.

In 2019, Togo set up a High Commission for Togolese Abroad (HTCE) in this same framework. The Commission serves as a bridge between the government and the diaspora. 

The Togolese diaspora contributed $441 million (238.3 billion FCFA) to the country’s diaspora, down from $458 million (247 billion FCFA) in 2019, according to Robert Dussey.

Esaïe Edoh

In Togo, the National Food Security Agency (ANSAT) opened new sales windows on May 3rd, according to the agency’s top management. 

The ANSAT added that the new windows take only bundled orders from public and private entities, in all prefectures, as well as orders from poultry farmers. Orders must be addressed to the ANSAT’s general directorate in Lomé or general directorates in regional capitals. 

By opening new sales points, the government agency aims to boost food security in Togo. About two months ago, on March 20, the ANSAT launched its nationwide sales campaign. As part of the latter, it has been selling 25kg and 50 kg bags of rice, corn, beans, and sorghum. Overall, 200 tons of corn has been made available to each of the five regions of the country.

The Togolese parliament recently approved of the country’s adhesion to the Global Green Growth Institute (GGGI). This should enable Togo to receive technical support from the Institute, and consequently boost its capacities to raise traditional funding. 

Also, the adhesion will accelerate the transition to a more resilient economy, while fostering job creation, job change, and capacity building. 

The bill was on the table since 2020. In October of that year, the government issued a draft bill for adhesion. 

Established in 2012, in Rio de Janeiro, Brazil, the GGGI has  39 Member States. In 2018,  it signed with the African Development Bank (AfDB) an agreement to promote programs and joint studies, among others.

France’s development agency, AFD, is expected to soon provide new financing for the West Africa Coastal Areas Resilience Investment Project (WACA-ResIP) in Togo. According to the program’s coordinator in the country, Abdul Rahimi Alimi, the agency should spend €35 million on works along the Agbadrafo-Gbodjomé (18 km) axis along the coast.

"The AFD has committed €35 million in additional financing for the WACA. This will enable the preservation of the coast, going from Gbodjomé to Agbodrafo; 18 groins will be built along this stretch,” Alimi told Togo First.

“The financing agreement should be signed soon. Talks are well advanced, we are about to sign and it should happen next week,” the coordinator said last Friday, May 5.

Which contractor?

For the works on the Agbodrafo-Gbodjomé segment, Alimi said they are looking to hand over the contract to Boskalis, the Dutch firm in charge of the works on the Agbodrafo-Hilacondji segment. "We are in talks with Boskalis for a follow-on contract because the quality and efficiency they have put into the work have been impressive, and we want the whole project to have harmony".

Boskalis has conducted significant coastal protection projects in Togo and Benin, following agreements totaling €63 million (approximately 42 billion FCFA). The works, which span a 40-kilometer stretch include building and restoring protective groins and beach sand replenishment. They are almost done (99%).

Ayi Renaud Dossavi

Last week, Togo raised CFA33 billion on the WAEMU market, 3 billion more than it was seeking. 

In detail, the Togolese treasury obtained CFA25.5 billion via fungible bills and CFA7.5 billion via fungible bonds. The former matures over 182 days and the latter over 3 years. 

According to the UEMOA-Titres’ report on the operation, 26 investors subscribed, raising CFA57 billion in all. Thus, the issue recorded a coverage rate of 189.69%. 

This is Togo’s third consecutive successful issue on the regional money market since the year began. 

Togo, it is worth noting, plans to secure CFA574 billion in this market in 2023. 

Esaïe Edoh

The West African Development Bank (BOAD) completed its recently-launched securitization operation. In a statement issued on May 2, the sub-regional lender announced that it raised, via the operation, a "historic" amount of CFA150 billion ($246 million) on the Uemoa financial market.

Carried out by BOAD Titrisation, the operation will help the Bank optimize its balance sheet, hence raising its capacity for financing its Member States. Specifically, the proceeds mostly finance the BOAD’s 2021-2025 "Djoliba" strategy.

The funds will be invested in projects that will bolster employment, water and rice production, road construction, States’ GDPs, and energy production, as well as help reduce CO2 emissions.

"The success of this operation is first and foremost that of the teams to whom I extend my warmest congratulations. They have been working hard for several months to structure it and get it approved by the WAMU Financial Markets Authority. It is then a new step in the dynamic that we are calling for, which is to find innovative financing mechanisms for the development projects of our member States. This operation, by restoring our balance sheet capacity, is in line with our expectations," said Serge Ekué, President of the BOAD, at the closing of this operation.

The funds collected will enable the Bank to stand by its commitment to be "the Bank of reference for a sustainable impact on the integration and transformation of West Africa".

To conduct the securitization, the BOAD was assisted by a consortium composed of NSIA Finance - SGI Togo - IMPAXIS Securities as co-lead managers of the placement syndicate. Bonds issued will mature over 7 years (84 months) at an annual rate of 6.10%. The operation was first announced in March. 

Esaïe Edoh